By Andre Stoorvogel, Director of Product Marketing, Rambus Payments
The rapid expansion of the cryptocurrency ecosystem demonstrates the power of the blockchain to revolutionize financial services and beyond. Yet at the same time, the inherent volatility provides a cautionary tale.
With blockchain implementations gaining traction, it is clear that a new approach is required to enhance the security and usability of crypto and digital assets. But how can this be achieved?
A token gesture or real security?
Tokenization is a trusted, proven technology already used to secure billions of payments in-store and online.
The good news is that this process can be applied to crypto assets.
By replacing sensitive credentials – such as the private keys for blockchain and cryptocurrency – with a unique token that can restrict use to a particular device or channel, tokenization mitigates fraud risk and protects the underlying value of credentials.
This is because tokens cannot be used by a third party to conduct transactions if intercepted, adding a layer of frictionless security that complements the immutability of the blockchain.
Two signatures are better than one
Employing multiple signature is another way to enhance security, through the introduction of additional distributed keys for recovery and authentication.
In practice, this requires at least two signatures to confirm a transaction, increasing security and preventing fraud. It also allows consumers to safely recover their public or private key if it is lost.
Importantly, as this approach still relies on the use of original keys that are vulnerable to attack, multi-signature functionality is only truly effective when combined with tokenization technology to ensure vulnerable original keys are protected if attacked.
Hard to hack ≠ hard to access
Until recently, the storage of crypto assets fell into one of two categories – hot and cold wallets.
Hot wallets are online storage services provided by exchanges, for example. Cold wallets are offline storage options and can range from USB devices to pieces of paper.
Both options have their problems. Hot wallets are constantly connected to the internet, meaning the vulnerable private keys are susceptible to attack from hackers and fraudsters. Cold wallets, while secure from hackers, limit the usability of cryptocurrencies. What’s more, if it is misplaced, or the hard drive corrupted, access to an asset will be irrevocably lost.
Given these challenges, it is apparent that there is a need to combine the security benefits of offline cold wallets with the convenience of an online wallet.
Segregated wallets fulfil this need by enhancing cold wallets with an additional security layer. When a user wants to access their asset, they can do so via a two-factor authentication protocol, which instantly makes their cold wallet warm. And by securing the asset in a cold environment, it cannot be hacked.
Usability – it’s the way forward
The usability problem for cryptocurrencies goes beyond just storage. The process of buying and selling is needlessly complex for novices and experts alike. From a security perspective, unfamiliar platforms and websites are an easy target for fraudsters.
But with many consumers now using online and mobile banking, there is a huge opportunity to incorporate blockchain solutions into the everyday experience. This will enable consumers to simply and securely access, trade and own multiple cryptocurrencies within a familiar environment.
A secure, convenient future for blockchain implementations
For a technology to be truly transformative, a secure foundation of trust and transparency is needed. Solutions that enable the secure storage and transfer of crypto assets, while democratizing access and improving the user experience, have the potential to enable this powerful technology to reach its full potential.
Interested in learning more about securing crypto assets on the blockchain? Download the Rambus eBook series now.
World shares sink as bond yields, commodities surge
By Ritvik Carvalho
LONDON (Reuters) – World shares sank on Monday as expectations for faster economic growth and inflation battered bonds and boosted commodities, while rising real yields made equity valuations look more stretched in comparison.
MSCI’s All Country World Index, which tracks shares across 49 countries, was down 0.4% after the start of European trade.
The pan-European STOXX 600 index was down 1%, at its lowest in 10 days. Germany’s DAX, France’s CAC 40 and Spain’s IBEX 35 index fell 1% each, Britain’s FTSE 100 lost 0.85% and Italy’s FTSE MIB index fell 0.9%. [.EU]
S&P 500 futures fell to their lowest since Feb. 4, down 1% on the day. [.N]
Bonds have been bruised by the prospect of a stronger economic recovery and greater borrowing as President Joe Biden’s $1.9 trillion stimulus package progresses.
Federal Reserve Chair Jerome Powell delivers his semi-annual testimony before Congress this week and is likely to reiterate a commitment to keeping policy super easy for as long as needed to drive inflation higher.
“The coming week is relatively thin on the international data agenda, but after the recent rise in long bond yields, Fed Chairman Powell’s hearings in both chambers of Congress (Tuesday / Wednesday) will be attracting great interest,” said Elisabet Kopelman, U.S. economist at SEB.
“The fact that the most recent rise in long bond yields has been driven by higher real interest rates and not just inflation expectations increases the probability of a dovish message.”
European Central Bank President Christine Lagarde is also expected to sound dovish in a speech later Monday.
Yields on 10-year Treasury notes have already reached 1.38%, breaking the psychological 1.30% level and bringing the rise for the year so far to a steep 43 basis points.
Analysts at BofA noted 30-year bonds had returned -9.4% in the year to date, the worst start since 2013.
“Real assets are outperforming financial assets big in ’21 as cyclical, political, secular trends say higher inflation,” the analysts said in a note. “Surging commodities, energy laggards in vogue, materials in secular breakouts.”
Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan went flat, after slipping from a record top last week as the jump in U.S. bond yields unsettled investors.
Japan’s Nikkei recouped 0.8% and South Korea 0.1%, but Chinese blue chips lost 1.4%.
A COPPER-PLATED RECOVERY
One of the stars has been copper, a key component of renewable technology, which shot up 7.7% last week to a nine-year peak. The broader LMEX base metal index climbed 5.5% on the week.
Oil prices have gone along for the ride, aided by tightening supplies and freezing weather, giving Brent gains of 22% for the year so far. [O/R]
On Monday, Brent crude futures were up 0.7% at $63.33 a barrel. U.S. crude added 0.7% to $59.65.
All of that has been a boon for commodity-linked currencies, with the Canadian, Australian and New Zealand dollars all higher for the year so far.
Sterling reached a three-year top at $1.4050, aided by one of the fastest vaccine rollouts in the world. British Prime Minister Boris Johnson is due to outline a path from COVID-19 lockdowns on Monday.
The U.S. dollar index has been relatively range-bound, with downward pressure from the country’s expanding twin deficits balanced by higher bond yields. The index was last at 90.342, not far from where it started the year at 90.260.
Rising Treasury yields has helped the dollar gain against the yen to 105.60, given the Bank of Japan is actively restraining yields at home.
The euro was steady at $1.2104, corralled between support at $1.2021 and resistance around $1.2169.
One commodity not doing so well is gold, partly due to rising bond yields and partly as investors question if crypto currencies might be a better hedge against inflation. [GOL/]
Gold stood at $1,793 an ounce, having started the year at $1,896. Bitcoin was off 3.3% on Monday at $55,535, but started the year at $32,216.
(Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; editing by Larry King)
Sterling steadies around $1.40, long positions at one-year high
LONDON (Reuters) – The pound hit a new three-year high of $1.4050 in early London trading on Monday, before stabilising around the $1.40 level, as bullish investors bet on the UK’s vaccination rollout bringing about an economic recovery.
Sterling rose to its highest levels since April 2018 when it crossed $1.40 on Friday, having risen 2.4% so far in 2021.
Analysts attributed the recent strengthening to the UK’s relative success in providing COVID-19 vaccinations, which is expected to help Britain’s economy rebound from its biggest contraction in 300 years.
Relief that a no-deal Brexit was avoided at the end of 2020 is also supporting the pound, as is a lessening of fears that the Bank of England could introduce negative interest rates.
Speculators added to their net long position for the third week running in the week to Feb. 16, CFTC positioning data showed. The market is at its most bullish in one year.
At 0839 GMT, the pound was at $1.3992, down 0.1% on the day. Versus the euro, it was up around 0.2% at 86.42 pence per euro, having touched a one-year high earlier in the session EURGBP=D3>.
“The move higher in cable this year has been primarily driven by pound strength rather than US dollar weakness,” wrote MUFG currency analyst Lee Hardman in a note to clients.
“If the highs from April 2018 are taken out it will encourage expectations that the pound is adjusting to a new higher equilibrium now that Brexit risks have diminished,” he said. “Whereas if those highs remain in place, market participants may then start to question whether recent pound strength is overshooting and thereby increasing the risk of a correction lower.”
British Prime Minister Boris Johnson will set out a plan on Monday to release the UK from its third national lockdown.
Some 17.6 million people, over a quarter of the 67 million population, have now received a first dose of a COVID-19 vaccine. The UK is behind only Israel and the United Arab Emirates in vaccines per head of population.
The yield on British government bonds jumped on Monday, boosted by the prospect of heavy U.S. fiscal stimulus and the UK economy reopening.
“Markets are still adjusting to the fact that the Bank of England is unlikely to implement negative rates for now, leading to a narrowing of the US-UK 10-year yield differential,” UBS strategists wrote in a note to clients.
(Reporting by Elizabeth Howcroft; Editing by Bernadette Baum)
FTSE 100 falls as inflation concerns weigh
(Reuters) – London’s FTSE 100 fell on Monday as higher commodity prices sparked fears of a spike in inflation, while investors awaited Prime Minister Boris Johnson’s plan for a phased easing of business restrictions.
The blue-chip FTSE 100 fell 0.6%, led by declines in consumer staples and industrials stocks.
Oil heavyweights BP and Royal Dutch Shell dipped 0.1% and 0.3%, respectively, despite higher crude prices. [O/R]
Johnson will plot a path out of COVID-19 lockdown on Monday in an effort to gradually reopen the battered $3 trillion economy, aided by one of the fastest vaccine rollouts in the world.
The mid-cap index fell 0.3%, led by declines in financials and industrials stocks.
British Airways-owner IAG rose 1.1% after it said it raised total liquidity by 2.45 billion pounds ($3.4 billion), reaching final agreement for a 2-billion-pound loan, and through a deal to defer 450 million pounds of pension deficit contributions.
Pub operator Mitchells & Butlers shed 0.5% as it reported a plunge in sales due to all its sites having been forced shut under the latest lockdown.
(Reporting by Shivani Kumaresan in Bengaluru; editing by Uttaresh.V)
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